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2nd OECD-Southeast Asia Regional Forum (April 27-28)

speech by Nguyen Dinh Tai

Director of Management Consulting and Training Center,

CIEM, Vietnam

VIETNAM’S POLICY IN ATTRACTING FDI

1. Some remark on the recent performance of FDI in

Vietnam

- Nowadays, the stable growth rate and improved

business-investment environment in Vietnam have

attracted a lot of attention of many large corporations

in the world with increasing scale of investment. Most

of investment which is available to pour into Vietnam

is focused on projects in the area of thermo-

electricity, real estate and steel industry.

- There emerged projects that have a great amount

of investment. For example, The Sumitomo Corporation,

after conducting a 2-year survey in Vietnam, planned to

make investment of 3.8 billion USD to build a thermo-

electricity factory with the capacity of 2,640 MW in

Van Phong economic area (Khanh Hoa province). This

corporation has just received the certificate of joint

investment with The Vinaliner to launch the project of

building the Van Phong international port, with the

initial investment of nearly 200 million USD. Besides,

the joint-venture between The AES Corporation (the US)

and The Coal and Mineral Corporation of Vietnam will

build Mong Duong 2 thermo-electricity factory (in Quang

Ninh province) with the capacity of 1,200 MW with the

investment of nearly 1.5 billion USD.

- In the area of real estate and tourism, there

are quite many big projects waiting for certificate of

investment. Notably, the project “the Asian pearl”

composed of financial centres, hotels and urban

complexes in Phu Quoc with the investment of 2.7

billion USD was invested by The Trustee Suisse

(Switzerland) in cooperation with The Vietnam

Construction Import-Export Corporation. Moreover, Kumho

Asiana of Korea also planned to build Giang Vo Culture-

Commerce Centre and My Dinh Exhibition Centre (Hanoi)

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valued at 2.5 billion USD. These two centres are

projected to be completed before 2010.

- After the investment decision was made by Intel,

the information technology of Vietnam becomes more and

more attractive to foreign investors and is now

attracting a lot of large-scale projects. The typical

example is that The Foxconn Corporation (Taiwan) is

planning to make investment of 5 billion USD to build

electronic technology areas in many provinces

throughout the country, and an electronic manufacturing

factory is expected to be brought into operation in Bac

Ninh. Also, the Pacific Land Limited Corporation of

England is also speeding up its investment of 1 billion

USD in Sai Dong A hi-tech zone.

Although the performance of attracting and

utilizing FDI has been improved compared to the

previous years, it has not corresponded to the present

potential and opportunities, when large investors like

Japan, Korea, Taiwan, the US, et are regarding Vietnam

as one of the prioritized area of investment.

2. Overall assessment of the performance relating to

FDI in Vietnam after promulgating the Investment Law

2.1. Positive factors

- The business environment in Vietnam has been

improved gradually to comply with the international

commitments of Vietnam, which is highly appreciated by

the community of foreign entrepreneurs, turning Vietnam

into an attractive destination to large investors. This

assessment was drawn from the results of the annual

survey conducted by JETRO announced in the first

quarter of 2007. Such big investors as Japan, Korea,

Taiwan, etc have begun a new wave of investment into

Vietnam.

- Adopting the Investment Law to both domestic and

foreign investment has created an equal competition for

enterprises, facilitated them to be expanded and

diversified; such barriers as the ratio of domesticated

components, the ratio of exported goods, etc have been

removed, making it easy for investors to choose any

line of business corresponding to their business ideas.

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- Speeding up decentralization in encouraging,

attracting and controlling foreign investment has

helped local authorities to be more proactive. The

procedure and management process over enterprises have

become more simple and easier to bring into full play

autonomy, accountability of enterprises.

- Investment promotion has been improved with

participation and cooperation of lines, ministries and

local authorities towards clinging to multinational

corporations, big investors in order to turning

intentions of making investment in Vietnam into real

projects.

- State management over foreign investment

activities has received a lot of attention from all

levels from central governments to lines, ministries

and local authorities.

- The Government promulgated the Directive No

15/2007/CT-TTg on some main solutions to speed up

foreign investment into Vietnam; the Decision No

109/2007/QĐ-TTg on the mechanism of building and

implementing the Program of National Investment

Promotion in the period of 2007-2010.

- Based on local socio-economic development plans

up to 2010, some provinces have worked out lists of

projects in need of investment, and facilitated

investors like shortening time, lessening the process

of “pre-examination”, implementing the process of one-

door transactions, reducing costs of granting

Certificates of investment, concentrating on building

infrastructures for industrial zones, creating “clean”

sites for investors.

2.2. Some shortcomings to be made transparent to

encourage investment

Some foreign investors suppose that Vietnam’s

commitments in investment with WTO have not come into

reality since there have been shortcomings arising

during implementation, there have been unclear items in

legal documents regulating investment, which causes not

only investors but also State management agencies to

have different ways of understanding and adopting those

documents. And this has slowed down the process of

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reviewing and granting certificates of investment,

like:

- The list of conditional investment areas is

applied for foreign investors, but specific conditions

are not put forward for each area but simply referred

for application in accordance with specialized laws or

commitments in international treaties. This has caused

the legal system of investment not to be transparent

and investors not to have confidence in reality of the

Investment Law.

- With regard to services, most of the commitments

relating to opening services market have been realized

directly but in a confusing way due to no documents

guiding implementation.

- Besides, there are some other disadvantages to

be dealt with, namely: infrastructures in some

provinces are still weak, auxiliary industries in

Vietnam are still limited, costs of inputs increase

(due to price influences of some commodities in the

international market), implementation of intellectual

property rights have not been strict, infrastructures

for employees in industrial parks are still in

difficulty, not being recovered.

- Decentralization of management over foreign

investment has been carried out, but in many provinces,

investment promotion has not been effectively

implemented in popularizing local images and potential,

due to limits in expenses, human resources (skills,

experiences), physical facilities for promotion are

still lacking.

3. Priorities for investment policy reform

Priorities for investment policy reform that are under consideration by the

Vietnamese government at different levels concentrate on the following pillars:

rapidly and completely adopt fair treatment among foreign and domestic

investors; guarantee early fulfillment of WTO commitments regarding

market entry in the service industry; accelerate the equitization program of

state-owned enterprises and provide for more integration of foreign

investors in the program;

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make entry and approval procedures relating to domestic and foreign

investors and their investment undertakings more transparent and readily

accessible; to be specific, further simplify the investment registration and

certification procedures, coupled with clearer and more friendly description

and explanation of the existing procedures; consider changing to a more

simple registration system for foreign investors doing a single job of

verifying conformity with Vietnamese laws; set clearer rules on areas

where investment is prohibited or only allowed conditionally;

tighten and make more effective communication and coordination

between central and provincial governments in the entry and approval

process and give explicit explanation on their respective responsibilities

and accountability.

clarify the role of the Parliament (laws approving entity) and the

government (laws enforcing body) with respect to investment;

increase the transparency of the real estate market in Vietnam, as well as

safety and marketability of land use rights; speed up and improve the

performance of land planning and strengthen management of planning

(including rezoning and reclaiming land being abused or ineffectively

used); simplify and warrant justice and equity rights, liabilities and

administrative routines in getting access to public property for production

and business use, with special focus on improving the ability of small and

medium enterprises (SMEs) to acquire land use rights and upgrade

property used in production and business directly from government

resources;

upgrade the capacity and enforcement of the Intellectual Property Act,

including introduction of preventive measures; provide refresher training to

judges; develop justice supporting services and give more power to

intellectual property enforcing agencies;

reinforce governance and provide political support for law drafting bodies;

underline counseling, critical debate, forecast and assessment of the

implication and competitiveness of existing and proposed legislations;

make transparent and concretize laws in order to mitigate opportunities for

corruption;

increase the capacity and independence of the judicial system in Vietnam.

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4. Some urgent measures to attract FDI

- To continue improving the mechanism of one-door

transaction in agencies in charge of granting

certificates of investment and managing investment;

building a mechanism of cooperation in dealing with,

supervising, checking investment activities; dealing

with procedures of land, tax, customs, etc timely to

create an open environment in investment.

- To speed up implementation of approved national

investment promotion programs, to be more interested in

some key regions/nations like: European, the US, Japan;

to make it possible for provinces to participate in

programs and working teams of investment promotion at

central level.

- To support big projects of foreign investors

which are now under negotiation or to formulate

projects in more flexible ways.

- To promulgate the list of projects calling for

national investment in the period of 2007-2010 and the

program of attracting foreign investment in the period

of 2007 – 2010 to lay a basis for lines, ministries and

local authorities to launch activities.